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Strategy: Manufacturing Superiority & Market Dominance, Part One

Article by Larry Valant February 4, 2017, 01:21 pm MST

In Playing to Win, A.G. Lafley and Roger Martin famously wrote in 2013 about using a strategic outline to approach company and market building through five steps. Our model pre-dated their article by more than three decades, but managed to predict quite accurately the approach they espouse.

Playing to Win, however, does a wonderful job of posing and answering the critical strategic questions of "where to play" and "how to win," as well as providing guidance for answering both questions well. They also focus on core capability and its role in strategy development. The answers to these questions provide the basis for fulfilling any firm's aspiration (or vision) quite successfully and are the basis for integration of the key elements of any firm's winning strategy.

Burruss Land & Lumber of Lynchburg, Virginia, had been incorporated in 1953 by Jim Gilley, whom years later I replaced as president. Associated Metals & Minerals, a multi-billion dollar international trading corporation based in New York City acquired Burruss in 1979.

Associated had decided to broaden its reach by diversifying into manufacturing operations in the U.S., and Burruss was one of their early acquisitions. Lynchburg is a charming town in the foothills of the Blue Ridge Mountains, and, while relatively small (pop. 75,000), it was a very sophisticated town that made recruitment of high-quality talent relatively easy. In fact, the Allied Arts building, where Burruss kept its corporate offices, was a striking, a small-scale replica of 30 Rockefeller Center in New York.

The Burruss Company

Burruss was a manufacturer of hardwood products including flooring for use in both residential and commercial homes and buildings. Burruss also manufactured laminated hardwood floor for use in both straight trucks and trailer trucks for over-the road transport of goods. The company's reputation was one of manufacturing the best products in terms of quality and durability. They also charged the highest prices. The company's products were distributed traditionally. For their truck floors, the finished product was sold and shipped from its two manufacturing facilities directly to the purchasing OEM, such as Fruehauf, Budd, Strick, and Trailmobile. Its hardwood flooring was distributed nationally through traditional flooring dealers.

The company had a track record of success and profitability especially during periods of strong economic growth. The OEMs, who were of course very cost conscious, preferred to use trailer floors supplied by Burruss' two major lower-priced competitors during slower periods of reduced trailer demand, and so Burruss' truck floor orders fell off dramatically during slower economic periods resulting in much lower profits for the company and substantial periodic layoffs of staff and workers.

This meant the company's annual revenues would plummet from an average high of $500 million or more down to levels of $250 million to $300 million. The company struggled to break even during those periods. While Burruss was able to keep most of its critical employees, the cyclical nature of the business obviously diminished the company's value. A solution to the cyclical nature of the business had proved quite elusive since Burruss management refused to position its "how to win" as anything other than the highest quality and highest price manufacturer. But that was all to change with Burruss Land & Lumber's acquisition by Associated Metals and Minerals, and the retirement of Jim Gilley, who had been the company's president and CEO for more than 30 years, particularly with regard to the company's overarching strategy and its approach to its marketplace.

After the acquisition, Burruss fell under the purview of Amos Melamede, one of the six owners of Associated Metals and Minerals, a multi-billion-dollar international company. Amos Melamede had been a fighter pilot for the Israeli Air Force. When I met him he was still flying although he had risen to the rank of General. Unless his country was on a war footing he spent his time running Associated's U.S. operations. Amos was a brilliant man who spoke four languages fluently. Educated at the Sorbonne and the London School of Economics, he was equally at ease discussing art or architecture as he was marginal returns on potential investments. When it came to running a business he required clear understanding of proposed strategies and their financial justification using residual income, and then impeccable execution of those strategies once approved. Amos hired me to replace Jim Gilley.

After getting me on board at Burruss, renamed The Burruss Company as a symbol of coming change, Amos asked me to define our market, where we would compete in that market and then how we would win in that market. Amos wanted an outline in 30 days and execution begun in 90 days. I felt that was do-able and committed to meet that schedule. We were to meet bi-weekly, either in New York at his offices at 30 Rockefeller, or in Lynchburg, at Burruss' offices. I began defining our strategy by getting to know our people, our facilities, and in particular Don Carson, who ran operations. A former football player who had played both ways -- as a fullback on offense and as a linebacker on defense -- Don managed the way he had played football, straight ahead and only to win. His people loved him and our product quality and schedule adherence reflected their loyalty and commitment to Don.

Don and the rest of his key staff, especially his field service people, spent a fair amount of time answering two questions that I posed to them. What was our greatest and most important capability and how much better were we than our competitors in this area? What were the things our competitors did better than we?

Working with our sales and marketing people, I challenged them to answer one question. Why should our customers buy from us? Was our product sufficiently superior to merit an almost 16 percent higher price for apparently comparable products? The answers to these questions would define our overarching strategy and the organization required to execute that strategy effectively.

The two teams were to meet each Friday to review findings to date and examine what preliminary conclusions we were drawing and where those conclusions might be leading us.

This is the first part of a two-part series on manufacturing strategy by Larry Valant and Gayle Hustad of Valant and Company. Read the second part here.